Download or read book Inflation and the informativeness of prices written by National Bureau of Economic Research and published by . This book was released on 1993 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Have Financial Markets Become More Informative written by Jennie Bai and published by . This book was released on 2012-12-01 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: The finance industry has grown, financial markets have become more liquid, and information technology allows arbitrageurs to trade faster than ever. But have market prices then become more informative? We use stock and bond prices to forecast earnings and find that the information content of market prices has not improved since 1960. We use a model with information acquisition and investment to link financial development, price informativeness, and allocational efficiency. As information costs fall, the predictable component of future earnings should rise and hence improve capital allocation and welfare. We find that this component has remained stable over the past 50 years. When we decompose price informativeness into real price efficiency and forecasting price efficiency, we find that both have remained stable.
Download or read book Identifying Price Informativeness written by Eduardo Dávila and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that outcomes (parameter estimates and R-squareds) of regressions of prices on fundamentals allow us to recover exact measures of the ability of asset prices to aggregate dispersed information. Formally, we show how to recover absolute and relative price informativeness in dynamic environments with rich heterogeneity across investors (regarding signals, private trading needs, or preferences), minimal distributional assumptions, multiple risky assets, and allowing for stationary and non-stationary asset payoffs. We implement our methodology empirically, finding stock-specific measures of price informativeness for U.S. stocks. We find a right-skewed distribution of price informativeness, measured in the form of the Kalman gain used by an external observer that conditions its posterior belief on the asset price. The recovered mean and median are 0.05 and 0.02 respectively. We find that price informativeness is higher for stocks with higher market capitalization and higher trading volume.
Download or read book Inflation and the Informativeness of Prices written by Mariano Tommasi and published by . This book was released on 1994 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Informativeness of Prices written by Roland Benabou and published by . This book was released on 1991 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Aggregate cost uncertainty, arising from real shocks or unanticipated inflation, reduces the informativeness of prices by scrambling relative and aggregate variations. But when agents can acquire additional information, such increased noise may in fact lead them to become better informed, and price competition will intensify. We examine these issues in a model of search with learning, where consumers search optimally from an unknown price distribution while firms price optimally given consumers' search rules. We show that the decisive factor in whether inflation variability increases or reduces the incentive to search, and thereby market efficiency, is the size of informational costs.
Download or read book Inflation and the Informativeness of Prices written by Laurence M. Ball and published by . This book was released on 1993 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the welfare effects of the relative price variability arising from inflation. When agents interact in anonymous markets, with customers buying from new suppliers each period, relative price variability benefits customers and cannot harm suppliers substantially. But if customers and suppliers form long-term relationships, prices have an informational role: a potential customer uses current prices as signals of future prices. Inflation reduces the informativeness of current prices, causing customers to make costly mistakes about which relationships to enter. In addition, the reduced informativeness of prices makes demand less price-elastic, thereby increasing markups. Both effects can be quantitatively significant at moderate inflation rates.
Download or read book Price Informativeness and Investment Sensitivity to Stock Price written by Qi Chen and published by . This book was released on 2005 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Crowding Out and the Informativeness of Security Prices written by Jonathan M. Paul and published by . This book was released on 1992 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Market Power and Price Informativeness written by Marcin T. Kacperczyk and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The asset ownership structure in financial markets worldwide is dominated by large institutional investors. Relative to households, institutional investors own a larger fraction of assets, have a more concentrated distribution of ownership, and have significant active and passive components. We study the implications of these facts for the informational content of prices using a general equilibrium portfolio-choice model with market power and endogenous information acquisition. We decompose the effects of a changing market structure into three channels: (i) a size channel, (ii) a concentration channel, and (iii) an information passthrough channel, which we show is the quantitatively largest of the three. We find that price informativeness is non-monotonic in institutional sector's size, monotonically decreasing in institutional sector's concentration, and monotonically decreasing in the size of the passive sector both due to quantity effect and an amplifying learning effect.
Download or read book Volatility and Informativeness written by Eduardo Dávila and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the equilibrium relation between price volatility and price informativeness in financial markets, with the ultimate goal of characterizing the type of inferences that can be drawn about price informativeness by observing price volatility. We identify two different channels (noise reduction and equilibrium learning) through which changes in price informativeness are associated with changes in price volatility. We show that when informativeness is sufficiently high (low) volatility and informativeness positively (negatively) comove in equilibrium for any change in primitives. In the context of our leading application, we provide conditions on primitives that guarantee that volatility and informativeness always comove positively or negatively. We use data on U.S. stocks between 1963 and 2017 to recover stock-specific primitives and find that most stocks lie in the region of the parameter space in which informativeness and volatility comove negatively.
Download or read book Stock Price Informativeness Cross listings and Investment Decisions written by Thomas Gehrig and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that a cross-listing allows a firm to make better investment decisions because it enhances stock price informativeness. This theory of cross-listings yields a rich set of new predictions. In particular, it implies that the sensitivity of investment to stock prices should be larger for cross-listed firms. Moreover, the increase in value generated by a cross-listing (the 'cross-listing premium') should be positively related to the size of growth opportunities and negatively related to the quality of managerial information. The sensitivity of the cross-listing premium to the size of growth opportunities increases when holdings and trading become more evenly distributed between foreign and domestic markets. Last, we show that concentration of trading in the home market ('flow-back') can indeed increase the cross-listing premium for some firms.
Download or read book Volatility and Informativeness written by Eduardo Dávila and published by . This book was released on 2019 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the equilibrium relation between price volatility and price informativeness in financial markets, with the ultimate goal of characterizing the type of inferences that can be drawn about price informativeness by observing price volatility. We identify two different channels (noise reduction and equilibrium learning) through which changes in price informativeness are associated with changes in price volatility. We show that when informativeness is sufficiently high (low) volatility and informativeness positively (negatively) comove in equilibrium for any change in primitives. In the context of our leading application, we provide conditions on primitives that guarantee that volatility and informativeness always comove positively or negatively. We use data on U.S. stocks between 1963 and 2017 to recover stock-specific primitives and find that most stocks lie in the region of the parameter space in which informativeness and volatility comove negatively.
Download or read book Economic Determinants of Price Informativeness About Future Earnings written by Jay Junghun Lee and published by . This book was released on 2019 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates how the value-creation process affects the extent to which stock prices incorporate value-relevant information about future earnings. In contrast to previous studies focusing on the value-reporting process, this paper shows that strong product market power accelerates the incorporation of future earnings into current equity prices due to less uncertainty about future cash flows and that intensive long-term investment deters such incorporation because of greater uncertainty regarding future cash flows. The results suggest that firm fundamentals shaped by product market competition and long-term investment explain the price informativeness about future earnings beyond the impact of management's reporting discretion.
Download or read book Crowding Out and the Informativeness of Security Prices written by Jonathan M. Paul and published by . This book was released on 1992 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Information Acquisition Price Informativeness and Welfare written by Rohit Rahi and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Price Informativeness and Investment Sensitivity to Stock Price written by Qi Chen and published by . This book was released on 2011 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stock prices and real investments are highly correlated. Previous literature has offered two main explanations for this high correlation. The first explanation relies on price being informative about investment opportunities, the second one is based on financing constraints. In this paper we empirically examine the effect of price informativeness on the sensitivity of investment to stock price. Using price non-synchronicity and PIN as measures of price informativeness, we find that the degree of informativeness is positively correlated with the sensitivity of investment to stock price. Since, according to previous literature, these measures reflect private information, the result suggests that prices perform an active role, i.e., that managers learn from stock price when making investment decisions. This result is robust to the inclusion of various control variables (such as controls for managerial information) and to changes in specification.
Download or read book Product Market Threat and Stock Price Informativeness written by Boubker Drissi and published by . This book was released on 2013 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt:
